A steady start to 2017

Despite the tumultuous political and economic landscape across the world, the Reserve Bank of Australia (RBA) has elected to leave the cash rate on hold at the record low of 1.50%. Whilst the hold was widely predicted by economists, there is still a strong belief in the market that rates will eventually increase as we approach 2018. Governor Philip Lowe had this to say in his official statement:

“Inflation remains quite low. The December quarter outcome was as expected, with both headline and underlying inflation of around 1 ½ per cent. The Bank’s inflation forecast are largely unchanged. The continuing subdued growth in labour costs means that inflation is expected to remain low for some time. Headline inflation is expected to pick up over the course of 2017 to be above 2 per cent, with the rise in underlying inflation expected to be a bit more gradual.”

“Conditions in the housing market vary considerably around the country. In some markets, conditions have strengthened further and prices are rising briskly. In other markets, prices are declining. In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Growth in rents is the slowest for a couple of decades. Borrowing for housing has picked up a little, with stronger demand by investors. With leverage increasing, supervisory measures have strengthened lending standards and some lenders are taking a more cautious attitude to lending in certain segments.”

So, what does all this mean for you? Despite the recent cash rate hold, lenders are free to change their rate at their own discretion. Keep a close eye on any rate movement, and consider whether your current loan is the right one for you, right now.